In our last post, we discussed the foundational steps couples needed to take to merge their finances. . Now, we move onto part two: the actual merging of finances. We’ll break down the three options couples have to merge (or not merge) their finances and the pros and cons of each.
Fully Merging All Finances: The "What's Mine is Yours" Approach
This is the traditional “all in” approach. Think of it as a financial marriage, where both of you put all your income, expenses, debts, and assets into one big pot. It’s the financial equivalent of jumping into the deep end together.
Pros:
- Simplicity: Joint accounts means you have less accounts to manage and don’t necessarily need to divide up expenses or savings.
- Unity: Fully merging can strengthen the feeling of being a team, and working together toward common goals.
- Transparency: Full disclosure of financial matters leaves little room for financial secrets.
Cons:
- Loss of (Feeling) Financial Independence: This can be a big adjustment, especially if both partners are used to managing their own money.
- Complicated If the Relationship Ends: Separating finances in the event of a breakup can be messy and complicated.
Before fully committing, have conversations with your partner about your respective values and histories to prepare you both better. It’s like relationship counseling – but for your wallet!
Keeping All Finances Completely Separate: The "Yours and Mine" Strategy
This is the complete opposite approach: keeping everything separate. You pay your bills, they pay theirs, and you split your joint expenses using some method that you find fair.
Pros:
- Independence: You both maintain financial autonomy, which can be important for personal comfort and security.
- Simplicity in Splitting Up: If things don’t work out, there’s less financial entanglement to unravel.
Cons:
- Lack of Team Spirit: It might be harder to feel like you’re working together toward common financial goals.
- Potential for Financial Imbalance: If there’s a significant income disparity, it might lead to feelings of inequality or resentment. Based on how you decide to split up your joint expenses, this could mean one partner is able to save more than the other. Or one partner is able to afford to do certain things that the other can’t.
It’s not impossible to be successful when you keep your finances separate, but regular check-ins about financial goals and responsibilities can help keep you both on the same page.
The Hybrid Approach: The "Best of Both Worlds"
Then there’s the middle ground. This is for couples who want to share some aspects of their finances while also maintaining a degree of independence.
Pros:
- Flexibility: You can tailor how you merge your finances to what feels comfortable for both of you.
- Autonomy and Teamwork: You both maintain a sense of independence while also working together on shared goals.
- Easier to Adjust: You can start with a hybrid model and gradually shift toward more or less sharing as needed.
Cons:
- Requires More Management: Juggling joint and separate accounts can be more complex.
- Potential for Confusion: It’s important to be very clear about what is shared and what is separate to avoid misunderstandings.
Start by opening a joint account for shared expenses like rent, groceries, or vacations, while keeping your separate accounts for personal expenses and savings.
No matter which path you choose for merging your finances, communication is critical. Talk openly about your financial situations, understand each other’s perspectives, and make a plan that works for both of you. And remember, what works for one couple may not work for another. It’s all about finding your own balance so you canbuild a life together. Happy budgeting!
Jim is a financial advisor and owner of Thinking Big Financial, Inc. Thinking Big Financial is a fee-only registered investment advisor offering financial planning and investment management services. Specializing in working with the LGBTQ Community.
Please read my legal disclaimer here.